Abstract

This dissertation examines the central thesis that individual
investors' decisions can be usefully studied from a self-regulation
perspective. I investigate the influence of self-regulatory systems
known as promotion (which reflects the fundamental human need for
advancement and growth) and prevention (which reflects the fundamental
need for safety and security) on investment decisions. Specifically, I
argue that different financial products differentially trigger
promotion versus prevention self-regulation. Some financial products
prime implicit goals that are primarily promotion-focused, whereas
others prime implicit goals that are primarily prevention-focused. As a
result, decisions involving these products are carried out with a
distinct promotion or prevention orientation.

I test these
predictions in eight studies among approximately 1,800 real-world
individual investors. A pilot study provides initial evidence that
investors indeed associate different investments with distinct
regulatory focuses. This pilot study also relates these differences to
various predictors such as income and investment experience. Study 1
shows that when investors are primed with a promotion focus or
prevention focus, they are inclined to allocate money to investment
accounts and invest in assets more compatible with that particular
goal. Study 2 shows that, in decisions involving financial products
tagged with a promotion focus, investors show disproportionate concerns
for potential gains whereas in decisions involving products tagged with
a prevention focus, investors show disproportionate concerns for
potential losses. Study 3 shows that investors' sensitivity to past
paper gains and paper losses in selling decisions are differentially
shaped by promotion and prevention focus. Study 4 and Study 5 test the
hypothesis that depending on whether the money one invests with comes
from an account tagged with a promotion focus or from one tagged with a
prevention focus, investors demonstrate different risk propensities in
their investment decisions. Study 6 attempts to disentangle the effects
of regulatory focus and risk attitude in financial decision-making.
Study 7 is a stock trading simulation designed to examine how
regulatory focus affects different aspects of trading behavior. These
eight studies are discussed and directions for future research are
suggested.

Doctoral Program News

Honigsberg featured in Ideas at Work

The August issue of Ideas at Work features research that doctoral candidate Colleen Honigsberg led in conjunction with Sharon Katz.

Profiles: PhD Students

Shiri MelumadMarketing
When asked about the Program's sense of community Shiri says: “There is a tight-knit community amongst the marketing students, and the relationships I have formed have been both professionally and personally rewarding.